KUALA LUMPUR, Dec 3 — After a volatile year for the local equities, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to trend higher towards the key 1,700-point level next year.
MIDF Research said going forward, the market consensus is anticipating a long-awaited resumption of positive corporate earnings growth after the pandemic-induced and trade war-related contractions in the current and prior years respectively.
“In this regard, the FBM KLCI is forecast to move higher based on a projected 12.85 per cent year-on-year corporate earnings growth next year. The forward growth rate is deemed fairly achievable considering the multi-year low-base and which is in line with cautiously positive sentiment on the macro outlook,” the research house said in its 2021 outlook presentation today.
“As the economy continues to recover and inflation increases, we view Bank Negara Malaysia (BNM) will begin to normalise the overnight policy rate (OPR) by the end of 2021 by 25 basis points,” it added.
MIDF Research said the key market movers for next year will be the Covid-19 vaccine development, loan moratorium as well as a possible early general elections which may be held as early as July next year.
“We reckon the market is nowadays more concerned about the resultant stability, or otherwise, post-election and less on pre-election goodies and promises,” it said.
As for the ringgit, the research house has placed the end-2021 target at 4.04 against the US dollar backed by stronger oil demand.
“Being a net exporter of petroleum, volatility in crude oil prices greatly affects the local currency movement. As oil prices are expected to increase further next year especially in anticipation of continued voluntary production cuts by Opec+ (Organisation of the Petroleum Exporting Countries plus allies) and non-Opec producers, which will lend support for ringgit,” it said.
Additionally, it said the resumption of businesses worldwide as restrictions are being lifted in stages is likely to increase demand for oil and other commodities.
“As Malaysia will continue to export goods more than import next year, a sustained current account surplus will be supportive for the ringgit to strengthen.
“We also expect investors’ appetite towards higher-yielding assets offered by the emerging markets to increase given the low-interest environment in the advanced markets,” it said. — Bernama
